ICG UCITS FUNDS (IRELAND) PLC

Transcription

1 (an open-ended variable capital investment company incorporated under the laws of Ireland pursuant to the European Communities (Undertakings for Collective Investment in Transferable Securities) Regulations, 2011) as amended and the Central Bank (Supervision & Enforcement) Act 2013 (Section 48(1)) (Undertaking for Collective Investment in Transferable Securities) Regulations 2015) Report and Audited Financial Statements Registration Number:

2 TABLE OF CONTENTS Page COMPANY INFORMATION 3-4 DEPOSITARY SERVICES PROVIDER S REPORT 5 DIRECTORS REPORT 6-10 STATEMENT OF DIRECTORS RESPONSIBILITIES 11 INVESTMENT MANAGER S REPORT 12 INDEPENDENT AUDITOR S REPORT TO THE MEMBERS OF ICG UCITS FUNDS (IRELAND) PLC STATEMENT OF FINANCIAL POSITION STATEMENT OF COMPREHENSIVE INCOME 18 STATEMENT OF CHANGES IN NET ASSETS ATTRIBUTABLE TO HOLDERS OF REDEEMABLE SHARES 19 STATEMENT OF CASH FLOWS 20 NOTES TO THE FINANCIAL STATEMENTS SCHEDULE OF INVESTMENTS SIGNIFICANT PORTFOLIO CHANGES (Unaudited) 57 ADDITIONAL INFORMATION (Unaudited)

3 COMPANY INFORMATION DIRECTORS REGISTERED OFFICE ADMINISTRATOR LEGAL ADVISOR (as to Irish Law) INDEPENDENT AUDITOR INVESTMENT MANAGER, PROMOTER, DISTRIBUTOR, AND UK FACILITIES AGENT DEPOSITARY SERVICES PROVIDER AND CUSTODIAN John Skelly* (Irish) Roddy Stafford* (Irish) Jason Vickers** (UK) *(independent non-executive director) **(non-executive director) 2nd Floor, Block E Iveagh Court Harcourt Road Dublin 2 Ireland SS&C Financial Services (Ireland) Limited La Touche House Custom House Dock IFSC Dublin D01 R5P3 Ireland Maples & Calder 75 St. Stephen s Green Dublin 2 Ireland Ernst & Young Harcourt Centre Harcourt Street Dublin 2 Ireland Intermediate Capital Managers Limited Juxon House 100 St. Paul's Churchyard London EC4M 8BU United Kingdom Citi Depository Services Ireland Designated Activity Company 1 North Wall Quay Dublin 1 Ireland 3

4 COMPANY INFORMATION (continued) COMPANY SECRETARY FRENCH CENTRALISING CORRESPONDENT SPANISH DISTRIBUTOR SWEDISH REPRESENTATIVE Carne Global Financial Services Limited 2nd Floor, Block E Iveagh Court Harcourt Road Dublin 2 Ireland Caceis Bank 1-3 Place Valhubert Paris France Seleccion e Inversion de Capital Global Agencia de Valores, S.A. Celle Maria Francisca Madrid Spain Arctic Fund Management AS Stockholm Filial Biblioteksgatan Stockholm Sweden 4

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6 DIRECTORS REPORT The Directors present their report together with the audited financial statements of ICG UCITS Funds (Ireland) plc (the Company ) for the year ended 31 March Company Background The Company is an open-ended umbrella type investment company with variable capital and segregated liability between its sub-funds incorporated in Ireland under the Companies Act 2014 on 29 January 2013 under registration number and authorised by the Central Bank of Ireland ( Central Bank ), as an Undertaking for Collective Investment in Transferable Securities ( UCITS ) pursuant to the European Communities (Undertakings for Collective Investment in Transferable Securities) Regulations, 2011 (the UCITS Regulations ) as amended. The Company is structured in the form of an umbrella fund which can consist of different sub-funds comprising of one or more share classes. The Company was seeded on 5 September 2013 via an in specie transfer of assets from another high yield transaction fund also managed by Intermediate Capital Managers Limited (the Investment Manager ). As at 31 March 2018, the Company had one sub-fund in existence, ICG High Yield Fund (the Fund ). These financial statements relate solely to the Fund. Principal Activities A review of the principal activities, performance and future developments is included in the Investment Manager s Report on page 12 and the succeeding pages. ICG High Yield Fund The Fund s investment objective is to generate a high level of return with the majority of the funds being invested in non-government sub-investment grade fixed income and debt securities issued by issuers and listed or traded on a Recognised Market. Corporate Governance Code A corporate governance code was issued by Irish Funds (the Irish Funds code ) in December 2011 that may be adopted on a voluntary basis by Irish authorised collective investment schemes effective 1 January, 2012 with a twelve-month transitional period. The Irish Funds Code may be inspected on/obtained from On 29 January 2013, the Board adopted the Irish Funds Code having regard for certain other key pillars of governance within the collective investment fund governance structure, including: the uniqueness of the independent segregation of duties as between the Investment Manager, the Administrator (with responsibility for the calculation of the net asset value, amongst other duties) and the independent Depositary (with responsibility for safeguarding the assets of the Company and overseeing how the Company is managed), such segregation of duties/functions being achieved through delegation of respective responsibilities to and appointment of suitably qualified and also regulated third party entities who are subject to regulatory supervision. 6

7 Corporate Governance Code (continued) DIRECTORS REPORT (continued) The Company has no employees and all of the Directors are non-executive. Consistent with the regulatory framework applicable to investment fund companies such, the Company, consequently, operates under the delegated model whereby it has delegated management (including investment management), administration and distribution functions to third parties (without abrogating the Board s overall responsibility). The Board has in place mechanisms for monitoring the exercise of such delegated functions which are always subject to the supervision and direction of the Board. These delegations of functions and the appointment of regulated third party entities are detailed in the Company s Prospectus and Supplement. In summary, they are: 1. The Board has delegated the performance of the investment management functions in respect of the Company and of its Fund to the Investment Manager. The Investment Manager has direct responsibility for the decisions relating to the day to day running of the Fund and is accountable to the Board of the Company for the investment performance of the Fund. The Investment Manager has internal controls and risk management processes in place to ensure that all applicable risks pertaining to their management of the Fund is identified, monitored and managed at all times and appropriate reporting is made to the Board on a regular basis. The Investment Manager is regulated by and under the supervision of the Financial Conduct Authority ( FCA ); 2. The Board has delegated its responsibilities for administration to SS&C Financial Services (Ireland) Limited (the Administrator ) which has responsibility for the day to day administration of the Company and the Fund including the calculation of the net asset values. The Administrator is regulated by and under the supervision of the Central Bank; 3. The Company also has appointed Citi Depository Services Ireland Designated Activity Company (the Depositary ) as custodian of its assets which has responsibility for the safekeeping of such assets in accordance with the UCITS Regulations and exercising independent oversight over how the Company is managed. The Depositary is regulated by and under the supervision of the Central Bank. The Board receives reports on a regular (and at least quarterly) basis from each of its delegated service providers and the Depositary which enable it to assess the performance of the delegated service providers and the Depositary (as the case may be). Future Developments The Directors expect positive developments on the Fund in the coming year as the Investment Manager has decided to actively market to third party investors. Results The results for the year are shown in the Statement of Comprehensive Income on page 18. Going Concern Management has made an assessment of the Company s ability to continue as a going concern and is satisfied that it has resources to continue in business for the foreseeable future. Furthermore, management is not aware of any material uncertainties that may cast significant doubt upon the Company s ability to continue as a going concern, therefore, the financial statements continue to be prepared on a going concern basis. 7

8 Connected Party Transactions DIRECTORS REPORT (continued) The Directors are satisfied that there are arrangements in place evidenced by written procedures to ensure that transactions carried out with connected parties of the Fund are carried out as if negotiated at arm s length and any such transactions are in the best interests of the Shareholders of the Fund. The Directors are satisfied that any transactions entered into with connected parties during the year complied with the aforementioned obligation. Adequate accounting records The measures taken by the Directors to secure compliance with the Company s obligation to keep adequate accounting records, as per requirement of Section 281 to 285 of the Irish Companies Act 2014, are the use of appropriate systems and procedures and the appointment of SS&C Financial Services (Ireland) Limited. The accounting records are maintained at La Touche House, Custom House Dock, IFSC, Dublin D01 R5P3, Ireland. Risk Management Objectives and Policies The primary financial risks the Directors have assessed as being relevant to the Company are market risk, interest rate risk, foreign currency risk, credit risk and liquidity risk. A detailed assessment of the risk management objectives and policies mitigating these risks is outlined in Note 9 of financial statements. Directors The Directors of the Company are as follows: John Skelly (Irish resident) Roddy Stafford (Irish resident) Jason Vickers (UK resident) Company Secretary Carne Global Financial Services Limited has acted as Secretary of the Company for the year ended 31 March Directors and Company Secretary Interests As at 31 March 2018 and 31 March 2017, none of Directors or the Company Secretary held shares in the Company. For details of Directors fees paid, see Note 3 of financial statements on page 28. Independent Auditors The Company s Independent Auditors, Ernst & Young, were re-appointed during the year in accordance with Section 160(6) of the Companies Act 2014 and have indicated their willingness to continue in office in accordance with Section 160(2) of that Act. 8

9 Directors Compliance Statement DIRECTORS REPORT (continued) The Directors acknowledge that they are responsible for securing the Company s compliance with the relevant obligations as set out in section 225 of the Companies Act, The Directors confirm that: 1) A compliance policy document has been drawn up that sets out policies, that in their opinion are appropriate to the company, respecting compliance by the Company with its relevant obligations; 2) appropriate arrangements or structures are in place that are, in their opinion, designed to secure material compliance with the Company's relevant obligations, and 3) during the financial year, the arrangements or structures referred to in 2) have been reviewed. Audit Committee Due to the size, nature and the scope of the Fund, the Directors believe that there is no requirement to form an audit committee as the Board is formed of non-executive Directors with two independent Directors and the Company complies with the provisions of the Corporate Governance Code. The Directors have delegated the day to day investment management and administration of the Company to the Investment Manager and to the Administrator respectively and has appointed Citi Depositary Services Ireland DAC as the Depositary of the assets of the Company. Relevant Audit Information All relevant information in connection with preparing the Auditor s Report has been disclosed to the auditors, and that each Director has taken all necessary steps to make himself or herself aware of all relevant audit information. Significant Events During the Year On 8 April 2017, the Fund paid distribution of EUR 15,254 to the shareholders of Class A Euro Dist Class shares at EUR 1.53 per share. The Fund was registered for marketing in Finland as of 31 May 2017 and in Denmark, Norway and the Netherlands as of 1 June This Fund was also registered in Italy as of 6 September 2017, in Sweden as of 18 September 2017 and in the UK as of 20 September Effective from 26 July 2017, new share class was in issue, Class B Euro Acc. All capital in Class B Euro Acc was switched from Class D Euro Acc. On 5 October 2017, the Fund paid distribution of EUR10,097 to the shareholders of Class A Euro Dist shares at EUR1.01 per share. There were no other significant events that happened during the period ended 31 March

10 Political Donations DIRECTORS REPORT (continued) No political donations were made during the year. (2017: Nil). Subsequent Events On April 2018, the Directors approved the declaration of EUR 14,576 distribution to the shareholders of Class A Euro Dist Class shares at EUR 1.46 per share. The Fund was registered for marketing in Germany on 23 May The Directors have recently approved the appointment of Carne Global Fund Managers (Ireland) Limited as Manager of the Company subject to approval of the Central Bank of Ireland which is anticipated to be obtained shortly. There were no other subsequent events that happened after the year end. Signed on behalf of the Board of Directors: Director Director Date: 17 July

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12 STATEMENT OF DIRECTORS RESPONSIBILITIES The Directors are responsible for preparing the Annual Report and Company s financial statements, in accordance with applicable law and regulations. Company law requires the Directors to prepare financial statements for each financial year. Under that law they have elected to prepare the financial statements in accordance with International Financial Reporting Standards (IFRS) as adopted by the EU and applicable law. Under company law the Directors must not approve the financial statements unless they are satisfied that they give a true and fair view of the assets, liabilities and financial position of the Company and of its changes in net assets attributable to holders of redeemable participating shares for that year. In preparing the financial statements, the Directors are required to: select suitable accounting policies and then apply them consistently; make judgments and estimates that are reasonable and prudent; state that the financial statements comply with IFRS as adopted by the EU; and prepare the financial statements on the going concern basis unless it is inappropriate to presume that the Company will continue in business. The Directors are responsible for keeping adequate accounting records as per the requirement of Section 281 to 285 of the Irish Companies Act 2014 which disclose with reasonable accuracy at any time the assets, liabilities, financial position and profit or loss of the Company and enable them to ensure that its financial statements comply with the Companies Act 2014 and the European Communities (Undertakings for Collective Investment in Transferable Securities) Regulations 2011 and the Central Bank (Supervision and Enforcement) Act 2013 (Section 48(1)) (Undertakings for Collective Investment in Transferable Securities) Regulations 2015 (the "Central Bank UCITS Regulations"). They have general responsibility for taking such steps as are reasonably open to them to safeguard the assets of the Company. In this regard they have entrusted the assets of the Company to a trustee for safe-keeping. They have general responsibility for taking such steps as are reasonably open to them to prevent and detect fraud and other irregularities. The Directors are also responsible for preparing a Directors Report that complies with the requirements of the Companies Act The Directors are also responsible for the maintenance and integrity of the corporate and financial information of the Company. Legislation in Ireland governing preparation and dissemination of financial statements may differ from legislation in other jurisdictions. To the best of our knowledge and belief, the information contained in this document is accurate and complete. Signed on behalf of the Board of Directors: Director Director Date: 17 July

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14 INVESTMENT MANAGER S REPORT (continued) ICG High Yield Bond Fund Period 31 March March 2018 Financial markets were heavily influenced by geopolitical factors and Central bank policy during the 12 months ended 31 March As global economic data pointed to improving growth trends both in the US and Europe, Central banks started to signal that easy monetary policy will start to be dialled back. The Federal Reserve continued hiking interest rates, with a 25bps rise in December 2017 and a further 25bps in March The ECB announced it would commence tapering its asset purchase programme from EUR60 billion to EUR30 billion in January Meanwhile, geopolitical themes including French elections, Brexit, North Korea tension and potential trade wars created much volatility in markets. Over the period, the 10 year bund yields increased from 0.32% to 0.50%. European high yield bonds, as measured by ML/Euro BB-B non-financial high yield index, posted positive returns from April 2017 through October 2017, with the second and third quarters being positive. However, the increase in market volatility towards the end of 2017 resulted in spread widening, with November and December being down months. Despite this, returns for 4Q 2017 stayed positive. This increase in risk aversion continued into the 1 st quarter of Although January 2018 was a small positive return, both February and March were in negative territory, resulting in 1 st quarter 2018 being negative. For the 12 months ending 31 March 2018, the fund s bench mark returned 3.56% compared to the fund returning 3.15%. Outlook Although high yield spreads widened by about 30bps in 1 st quarter of 2018, we believe this to be more a function of general market volatility rather than specifically relating to fundamentals decorating in the high yield market. At current levels, we find spreads attractive, particularly at the B level, as European economic growth is continuing at moderate pace and corporate health remains healthy. Having said this, we should expect bouts of volatility during the rest of the year. Intermediate Capital Managers Limited Date: 17 July

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18 STATEMENT OF FINANCIAL POSITION As at 31 March 2018 ICG High Yield Fund Total ICG High Yield Fund Total 31-Mar Mar Mar Mar Note EUR EUR EUR EUR Assets Cash and cash equivalents 6 1,290,839 1,290, , ,518 Financial assets at fair value through profit or loss: Investments in transferable securities and financial derivative instruments 4 32,200,560 32,200,560 11,863,154 11,863,154 Due from broker 140, , , ,525 Other receivables 5 1,028,185 1,028, , ,793 Total assets 34,659,920 34,659,920 13,092,990 13,092,990 Liabilities Financial liabilities at fair value through profit or loss: Investments in financial derivative instruments 4 (13,750) (13,750) (72,915) (72,915) Due to broker - - (540,215) (540,215) Other payables and accrued expenses 7 (162,156) (162,156) (62,987) (62,987) Total liabilities (175,906) (175,906) (676,117) (676,117) Net assets attributable to holders of redeemable shares 34,484,014 34,484,014 12,416,873 12,416,873 Net Asset Value per Redeemable Shares 31-Mar Mar Mar-2016 Class A Euro Acc Number of shares per class 8, , , Net Asset Value per share EUR EUR EUR Net Asset Value EUR 1,449,148 EUR1,415,447 EUR1,308,860 Class A Euro Dist Number of shares per class 10, , , Net Asset Value per share EUR EUR EUR Net Asset Value EUR 1,118,239 EUR1,117,223 EUR1,076,473 Class A USD Acc Number of shares per class 2, , , Net Asset Value per share USD USD USD Net Asset Value USD 525,227 USD502,753 USD1,905,588 The accompanying notes form an integral part of the financial statements 16

19 STATEMENT OF FINANCIAL POSITION (Continued) As at 31 March Mar Mar Mar-2016 Class B EUR Acc Number of shares per class 85, Net Asset Value per share EUR Net Asset Value EUR 8,482, Class D Euro Acc Number of shares per class 127, , , Net Asset Value per share EUR EUR EUR Net Asset Value EUR 23,007,115 EUR9,414,143 EUR9,075,554 Signed on behalf of the Board of Directors. Director Director Date: 17 July 2018 The accompanying notes form an integral part of the financial statements 17

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21 STATEMENT OF COMPREHENSIVE INCOME ICG High Yield Fund Total ICG High Yield Fund Total 31-Mar Mar Mar Mar Note EUR EUR EUR EUR Investment income Interest income - net 1,491,633 1,491, , ,230 Net (losses)/gain on financial assets and liabilities at fair value through profit or loss 11 (636,649) (636,649) 509, ,403 Net (losses)/gain on foreign exchange (17,317) (17,317) 56,642 56,642 Fee reimbursement 3 163, , , ,459 Other income 1,406 1,406 1,517 1,517 Net investment income 1,002,506 1,002,506 1,670,250 1,670,250 Expenses Interest expense (417,736) (417,736) (212,060) (212,060) Administration fee 3 (120,000) (120,000) (117,751) (117,751) Depositary fee 3 (48,633) (48,633) (34,411) (34,411) Investment management fee 3 (95,711) (95,711) (22,733) (22,733) Directors fees 3 (27,500) (27,500) (25,253) (25,253) Other expenses 3 (200,434) (200,434) (162,705) (162,705) Total operating expenses (910,014) (910,014) (574,913) (574,913) Total comprehensive income from operations 92,492 92,492 1,095,338 1,095,338 Finance costs Distributions 20 (25,351) (25,351) (44,451) (44,451) Total comprehensive income attributable to holders of redeemable shares 67,141 67,141 1,050,887 1,050,887 The accompanying notes form an integral part of the financial statements 18

22 STATEMENT OF CHANGES IN NET ASSETS ATTRIBUTABLE TO HOLDERS OF REDEEMABLE SHARES ICG High Yield Fund Total ICG High Yield Fund Total 31-Mar Mar Mar Mar-2017 EUR EUR EUR EUR Balance at the beginning of the year 12,416,873 12,416,873 13,133,116 13,133,116 Change in net assets attributable to holders of redeemable shares during the year 67,141 67,141 1,050,887 1,050,887 Issue of redeemable shares during the year 22,000,000 22,000, Redemption of redeemable shares during the year - - (1,767,130) (1,767,130) Balance at the end of the year 34,484,014 34,484,014 12,416,873 12,416,873 The accompanying notes form an integral part of the financial statements 19

23 STATEMENT OF CASH FLOWS ICG High ICG High Yield Fund Total Yield Fund Total 31-Mar Mar Mar Mar-2017 EUR EUR EUR EUR Operating activities Adjustments for: Proceeds from sale of investments - principal 27,612,644 27,612,644 20,672,733 20,672,733 Proceeds from sale of investments - gains/losses 106, ,363 (91,905) (91,905) Purchase of investment securities (48,752,228) (48,752,228) (20,497,259) (20,497,259) Due from broker (140,525) (140,525) Due to broker (540,215) (540,215) 540, ,215 Interest received - net 1,169,494 1,169, , ,550 Interest paid (417,736) (417,736) - - Expenses paid (414,522) (414,522) (394,277) (394,277) Net cash flows (used in)/provided by operating activities (21,236,011) (21,236,011) 817, ,532 Financing activities Proceeds from subscriptions of redeemable shares 22,000,000 22,000, Payments on redemption of redeemable shares - - (1,767,130) (1,767,130) Distributions paid (25,351) (25,351) (44,451) (44,451) Net cash flows provided by/(used in) financing activities 21,974,649 21,974,649 (1,811,581) (1,811,581) Net increase/(decrease) in cash and cash equivalents during the year 738, ,638 (994,049) (994,049) Effect of exchange rate fluctuations on cash and cash equivalents (17,317) (17,317) 56,642 56,642 Cash and cash equivalents at start of the year 569, ,518 1,506,925 1,506,925 Cash and cash equivalents at end of the year 1,290,839 1,290, , ,518 The accompanying notes form an integral part of the financial statements 20

24 1. GENERAL INFORMATION NOTES TO THE FINANCIAL STATEMENTS ICG UCITS Funds (Ireland) plc (the Company ) was incorporated in Ireland on 29 January 2013 as an investment company with variable capital structured as an umbrella fund with segregated liability between sub-funds and incorporated pursuant to the Companies Act 2014, with limited liability and authorised by the Central Bank as an Undertaking for Collective Investment in Transferable Securities (UCITS) pursuant to the European Communities (Undertakings for Collective Investment in Transferable Securities) Regulations 2011, as amended (the UCITS Regulations ) and the Central Bank (Supervision and Enforcement) Act 2013 (Section 48(1)) (Undertaking for Collective Investment in Transferable Securities) Regulations 2015 (the Central Bank UCITS Regulations ). The Company is constituted as an umbrella fund insofar as the share capital of the Company is divided into different series of shares with each series of shares representing a portfolio of assets which comprises a separate fund (each a Sub-Fund ). The Company commenced its operations on 5 September 2013 with the launch of the ICG High Yield Fund (the Fund ). The investment objective of the Fund is to generate a high level of return with the majority of the fund being invested in non-government sub-investment grade fixed income and debt securities issued by issuers and listed or traded on a Recognised Market. As at 31 March 2018, the Fund is the only Sub-Fund of the Company. These financial statements relate solely to the Fund. Intermediate Capital Managers Limited (the Investment Manager ) acts as Investment Manager of the Fund. The Fund currently has Class A Euro Acc, Class A Euro Dist, Class A USD Acc, Class B EUR Acc and Class D Euro Acc Shares available for investment. 2. SIGNIFICANT ACCOUNTING POLICIES (a) Statement of compliance The financial statements as at and for the year ended 31 March 2018 have been prepared in accordance with IAS 34: Interim Financial Reporting, International Financial Reporting Standards (IFRS) as adopted by the European Union as issued by the International Accounting Standards Board (IASB), the UCITS Regulations and the Central Bank UCITS Regulations. (b) Basis of measurement The financial statements have been prepared on a historical cost basis except for the financial assets and financial liabilities that have been measured at fair value. (c) Going concern Management has made an assessment of the Company s ability to continue as a going concern and is satisfied that it has resources to continue in business for the foreseeable future. Furthermore, management is not aware of any material uncertainties that may cast significant doubt upon the Company s ability to continue as a going concern, therefore, the financial statements continue to be prepared on a going concern basis. 21

25 NOTES TO THE FINANCIAL STATEMENTS (continued) 2. SIGNIFICANT ACCOUNTING POLICIES (continued) (d) New accounting standards not yet adopted The following new standards and amendments to standards are relevant but not yet effective for the Company's operations: IFRS 9 Financial Instruments ( IFRS 9 ) as issued reflects the first phase of the IASB s work on the replacement of IAS 39 and applies to recognition, derecognition, classification and measurement of financial assets and financial liabilities. Its requirements represent a significant change from the existing requirements in IAS 39 in respect of financial assets. IFRS 9 contains two primary measurement categories for financial assets: amortised cost and fair value. A financial asset would be measured at amortised cost if it is held within a business model whose objective is to hold assets in order to collect collateral cash flows, and the asset s contractual terms give rise on specified dates to cash flow that are solely payments of principal and interest on the principal outstanding. All other financial assets would be measured at fair value. IFRS 9 eliminates the existing IAS 39 categories of held to maturity, available for sale and loans and receivables. The requirements of IFRS 9 relating to derecognition are unchanged from IAS 39. The IASB has tentatively decided to require an entity to apply IFRS 9 for annual periods beginning on or after 1 January In subsequent phases, the IASB will address hedge accounting and impairment of financial asset. The standard is not expected to have a material impact on the measurement basis of the financial assets held by the Fund since the majority of the Fund s financial assets are measured at fair value through profit or loss. No impact on the net asset value and the results of the Fund is expected from the adoption of IFRS 9. IFRS 15 Revenue from Contracts with Customers was issued in May 2014 and establishes a new five-step model that will apply to revenue arising from contracts with customers. Under IFRS 15 revenue is recognised at an amount that reflects the consideration to which an entity expects to be entitled in exchange for transferring goods or services to a customer. The principles in IFRS 15 provide a more structured approach to measuring and recognising revenue. The new revenue standard is applicable to all entities and will supersede all current revenue recognition requirements under IFRS. Either a full or modified retrospective application is required for annual periods beginning on or after 1 January 2018 with early adoption permitted. The Company is currently assessing the impact of IFRS 15 and plans to adopt the new standard on the required effective date. There are no other standards, interpretations or amendments to existing standards that are not yet effective that would be expected to have a significant impact on the Company. 22

26 NOTES TO THE FINANCIAL STATEMENTS (continued) 2. SIGNIFICANT ACCOUNTING POLICIES (continued) (e) Foreign currency translation Transactions in foreign currencies are translated into Euro (EUR) for the Fund at the spot exchange rate at the date of the transaction. Monetary assets and liabilities denominated in foreign currencies at the reporting date are retranslated into EUR for the Fund at the spot exchange rate at that date. Non-monetary assets and liabilities denominated in foreign currencies that are measured at fair value through profit or loss are retranslated into EUR for the Fund at the spot exchange rate at the date that the fair value was determined. Non-monetary assets and liabilities that are measured in terms of historical cost in a foreign currency are translated using the exchange rate at the date of the transaction. Foreign currency differences arising on retranslation and on financial instruments at fair value through profit or loss are recognised in the Statement of Comprehensive Income. (f) Functional and presentation currency The functional and presentation currency of the Company is EUR. The functional and presentation currency of the Fund is EUR which reflects the Fund s primary trading activity, including the subscriptions into and redemptions from the Fund. (g) Use of estimates and judgements The preparation of the financial statements in conformity with IFRS requires management to make judgements, estimates and assumptions that affect the application of accounting policies and the reported amounts of assets and liabilities, income and expenses. Actual results may differ from these estimates. Estimates and underlying assumptions are reviewed on an ongoing basis. Revisions to accounting estimates are recognised in the period in which the estimates are revised and in any future periods affected. (h) Interest income and expense recognition Interest income and expense are recognised in the Statement of Comprehensive Income on an accruals basis. (i) Expenses Expenses are accounted for on an accruals basis and are charged to the Statement of Comprehensive Income. 23

27 NOTES TO THE FINANCIAL STATEMENTS (continued) 2. SIGNIFICANT ACCOUNTING POLICIES (continued) (j) Investments Classification In accordance with IFRS 13 Fair Value Measurement ( IFRS 13 ), the Company classifies its investments as financial assets and liabilities at fair value through profit or loss. These financial assets and liabilities are classified as held for trading. Financial assets or financial liabilities held for trading are those acquired or incurred principally for the purposes of selling or repurchasing in the short-term. All investments held by the Company have been classified as held for trading. Recognition/derecognition The Company recognises financial assets and financial liabilities at fair value through profit or loss on the trade date; that is the date it commits to purchase the instruments. From this date any gains and losses arising from changes in fair value of the assets or liabilities are recognised. Financial assets are derecognised when the rights to receive cash flows from the investments have expired or the Company has transferred substantially all risks and rewards of ownership of the financial assets or in which the Company neither transfers nor retains substantially all the risks and rewards of ownership and does not retain control of the financial assets. Initial measurement The investments are categorised at fair value through profit or loss and are recognised initially at fair value with transaction costs for such instruments being recognised directly in the Statement of Comprehensive Income. Subsequent measurement Subsequent to initial recognition, all investments classified at fair value through profit or losses are measured at fair value with changes in their fair value recognised in the Statement of Comprehensive Income. Fair value is the amount for which an asset could be exchanged, or a liability settled, in an orderly transaction between market participants at the measurement date. The fair value of financial instruments is based on their quoted market prices on a recognised exchange or sourced from a reputable broker/counterparty, at the Statement of Financial Position date without any deduction for estimated future selling costs. Financial assets and financial liabilities are priced at their last traded prices. If a quoted market price is not available on a recognised stock exchange or from a broker/counterparty, the fair value of the financials instruments may be estimated by the Directors using valuation techniques, including use of arm s length market transactions or any other valuation technique that provides a reliable estimate of prices obtained in actual market transactions. Forward currency contracts Forward currency contracts will be valued by reference to the forward price at which a new forward contract of the same size and maturity could be undertaken at the valuation date. The unrealised gain or loss on open forward currency contracts is calculated as the difference between the contract rate and this forward price and is recognised in the Statement of Comprehensive Income. 24

28 NOTES TO THE FINANCIAL STATEMENTS (continued) 2. SIGNIFICANT ACCOUNTING POLICIES (continued) (k) Offsetting financial instruments Financial assets and liabilities are offset and the net amount reported in the Statement of Financial Position when there is a legally enforceable right to offset the recognised amounts, and there is an intention to settle on a net basis, or realise the asset and settle the liability simultaneously. (l) Realised and unrealised gains and losses All realised and unrealised gains and losses on securities are recognised as net gains/losses on financial assets and liabilities at fair value through profit or loss in the Statement of Comprehensive Income. Foreign currency gains/losses on cash in hand and cash equivalents are included in net gains/losses on foreign exchange in the Statement of Comprehensive Income. Realised gains and losses on disposals of financial instruments are calculated using the first-in-first-out (FIFO) method. The unrealised gains or losses on open forward currency contracts are calculated as the difference between the contracted rate and the rate to close out the contract. Realised gains or losses include net gains/losses on contracts, which have been settled or offset by other contracts. (m) Taxation Under current law and practice, the Company qualifies as an investment undertaking as defined in Section 739B of the Taxes Consolidation Act, 1997, as amended. On this basis, it is not chargeable to Irish tax on its income or gains. However, Irish tax may arise on the occurrence of a chargeable event. A chargeable event includes any distribution payments to shareholders or any encashment, redemption or transfer of Shares on the ending of a relevant period. A relevant period is an eight year period beginning with the acquisition of shares by the shareholders. Each subsequent period of eight years immediately after the preceding relevant period will also constitute a relevant period. A gain on a chargeable event does not arise in respect of: (i) (ii) (iii) (iv) any transactions in relation to units held in a recognised clearing system as designated by order of the Revenue Commissioners of Ireland; or an exchange of shares arising on a qualifying amalgamation or reconstruction of the Company with another Company; or certain exchanges of shares between spouses and former spouses; or an exchange by a shareholder, effected by way of an arm s length bargain where no payment is made to the shareholder of shares in the Company for other shares in the Company. No Irish tax will arise on the Company in respect of chargeable events in respect of: (i) (ii) a shareholder who is not Irish resident and not ordinarily resident in Ireland at the time of the chargeable event, provided appropriate valid statutory declarations in accordance with the provisions of the Taxes Consolidation Act, 1997, as amended are held by the Company; and certain exempted Irish tax resident shareholders who have provided the Company with the necessary signed statutory declarations. 25

29 NOTES TO THE FINANCIAL STATEMENTS (continued) 2. SIGNIFICANT ACCOUNTING POLICIES (continued) (m) Taxation (continued) In the absence of an appropriate declaration, the Company will be liable to Irish tax on the occurrence of a chargeable event. There were no chargeable events during the year under review. Dividends, interest and capital gains (if any) received on investments made by the Company may be subject to withholding taxes imposed by the country from which the investment income/gains are received and such taxes may not be recoverable by the Company or its shareholders. (n) Distributions For those accumulation Share Classes in issue, it is the present intention of the Directors not to declare or pay dividends, and any income or gains earned by the Fund and these Share Classes, will be reinvested and reflected in the value of the Shares. For those income distribution Share Classes in issue, subject to net income being available for distribution, the Directors intend to declare dividends in respect of each six month period ending on 31 March and 30 September on the first business day after the relevant period end. Any such dividends will be paid within four months after declaration. The Directors reserve the right to increase or decrease the frequency of dividend payments, if any, at their discretion for income distribution Shares. In the event of a change of policy full details will be disclosed in an updated Supplement and shareholders will be notified in advance. Distributions declared to holders of redeemable shares are recognised in the Statement of Comprehensive Income. (o) Cash and cash equivalents Cash and cash equivalents comprises cash on hand and demand deposits. Cash equivalents are short term, highly liquid investments that are readily convertible to known amounts of cash and which are subject to insignificant changes in value. Cash equivalents include unrestricted cash balances held at brokers. Cash and cash equivalents include cash amounts held with Citibank N.A. in the name of Citi Depository Services Ireland Designated Activity Company (the Depositary ). Cash accounts held with a third party banking entity for collection of subscriptions, payment of redemptions and dividends for the Company are included as part of cash and cash equivalents. (p) Due from broker Due from and due to broker represents amounts receivable for securities sold and payable for securities purchased that have been contracted for but not yet settled or delivered on the Statement of Financial Position date. These amounts are recognised initially at fair value and subsequently measured at amortised cost, less provision for impairment, if any. A provision for impairment of amounts due from broker is established when there is objective evidence that the Company will not be able to collect the amounts due from the broker. 26

30 NOTES TO THE FINANCIAL STATEMENTS (continued) 2. SIGNIFICANT ACCOUNTING POLICIES (continued) (q) Transaction costs Transaction costs are defined as the incremental costs that are directly attributable to the acquisition, issue or disposal of a financial asset or financial liability. An incremental cost is one that would not have been incurred if the entity had not acquired, issued or disposed of the financial instrument. When a financial asset or financial liability is recognised initially, an entity shall measure it at its fair value through profit or loss plus transaction costs that are directly attributable to the acquisition or issue of the financial asset or financial liability. These costs consist solely of the spread between bid and ask price on the purchase or sale of the financial asset or financial liability and are included within the net gains/(losses) on financial assets and liabilities at fair value through profit or loss on the Statement of Comprehensive Income. 3. FEES AND EXPENSES (a) Administration Fee The Administrator is entitled to receive a fee out of the net assets of the Fund, in an amount which is subject to a minimum fee of EUR7,500 per month for the first year from the date of approval of the Fund by the Central Bank and a minimum fee of EUR10,000 per month thereafter. This fee will be accrued and calculated on each dealing day and payable quarterly in arrears. The Administration fee is as follows: Net Asset Value of the Fund (EUR) % Fee 0-99 million (inclusive) 0.12% 100 million 249 million (inclusive) 0.10% 250 million and over (inclusive) 0.07% The Company also reimburses the Administrator out of the assets of the Fund, for its reasonable costs and out of pocket expenses. During the year administration fees of EUR120,000 (31 March 2017: EUR117,751 ) were charged to the Fund out of which EUR10,000 (31 March 2017: EUR20,000) remained unpaid as at 31 March (b) Audit Fee Audit fee for the year amounted to EUR28,299 (31 March 2017: EUR23,800) and as at 31 March 2018, EUR44,405 remained outstanding which is inclusive of the outstanding balance from 31 March 2017 of EUR16,106. In accordance with SI 220 (the European Communities Statutory Audits directive 2006/43/EC) the Fund is obliged to disclose fees paid to the Auditor. There were no other assurance, tax advisory, or other non-audit fees incurred during the year. 27

31 3. FEES AND EXPENSES (continued) NOTES TO THE FINANCIAL STATEMENTS (continued) (c) Depositary Fee The Depository is entitled to receive a fee in its capacity as depository services provider out of the net assets of the Fund of a percentage of the Net Asset Value of the Fund as detailed below, subject to a minimum fee of EUR2,500 per month. This fee will be accrued and calculated monthly and payable monthly in arrears. Net Asset Value of the Fund (EUR) % Fee million (inclusive) 0.025% million (inclusive) 0.020% 400 million and over (inclusive) 0.001% The Depositary is also entitled to be reimbursed, out of the assets of the Fund, for its reasonable costs and out-of-pocket expenses. During the year, depositary fee of EUR48,633 (31 March 2017: EUR34,411) was charged to the Fund, out of which EUR6,501 (31 March 2017: EUR15,912) remained unpaid as at 31 March (d) Directors Fees and Expenses The Directors held office as at 31 March 2018 are listed on page 3. The Directors are entitled to a fee in remuneration for their services at a rate to be determined from time to time by the Directors, but so that the amount of Directors remuneration in any one year shall not exceed EUR20,000 plus VAT for each Director, if any unless otherwise notified to Shareholders in advance. Jason Vickers did not receive any fees for the year ended 31 March 2018 as he is an employee of the Investment Manager. Directors fees of EUR27,500 (31 March 2017: EUR25,253) were incurred for the year ended 31 March 2018, of which EURNil was payable at 31 March 2018 (31 March 2017: EURNil). Directors expenses of EUR6,941 (31 March 2017: EUR5,091) were incurred for the year ended 31 March 2018, of which EUR Nil was payable at 31 March 2018 (31 March 2017: EUR Nil). (e) Operating Expenses The Fund bears its own costs and expenses including, but not limited to, taxes, organisational and offering expenses, administration expenses and other expenses associated with its activities subject to reimbursement, please see Note 3 (h). (f) Investment Management Fee The Company is subject to an investment management fee in respect of each share class of the Fund in an amount which will not exceed those detailed as follows: (i) 0.75% per annum of the NAV of the Fund in the case of Class A Shares; (ii) 1.25% per annum of the NAV of the Fund in the case of Class B Shares; (iii) 1.00% per annum of the NAV of the Fund in the case of Class C Shares; and (iv) Nil per annum of the NAV of the Fund in the case of Class D Shares. 28

32 3. FEES AND EXPENSES (continued) NOTES TO THE FINANCIAL STATEMENTS (continued) (f) Investment Management Fee (continued) Class D Shares do not bear any investment management fees and are available only to certain categories of investors as determined by the Directors in their absolute discretion. The primary purpose of the Class D Shares is to facilitate investors who are investing in the Fund indirectly through vehicles managed by the Investment Manager thereby avoiding double-charging of fees or to facilitate investors who are shareholders, directors, members, officers or employees of the Investment Manager. Shares of any Class cannot be switched for Shares of Class D. This investment management fee is paid by the Company to the Investment Manager out of the assets of the Fund. The Company also reimburses the Investment Manager out of the assets of the Fund for reasonable out-of-pocket expenses incurred by the Investment Manager. During the year, an investment management fee of EUR95,711 (31 March 2017: EUR22,733) was charged to the Fund out of which EUR88,522 (31 March 2017: EUR5,524) remained unpaid as at 31 March (g) Other expenses 31-Mar Mar-17 EUR EUR Regulatory expense 6,666 3,815 Legal and foreign registration services fee 95,678 67,032 Professional fees 41,243 25,702 Audit fees 28,299 23,800 Corporate secretarial fees 9,840 9,840 Directors expenses 6,941 5,091 Agent Company fee expense 2,836 - VAT Services fee 2, Miscellaneous expenses 6,423 26,900 Total 200, ,705 (h) Fee Reimbursement On 1 August 2015, the Investment Manager agreed that a Total Expense Ratio ( TER ) cap of 1% per annum will be applied to each share class of the Fund. The TER cap will include all fees outlined in the fees and expenses section of the Supplement to the Prospectus (excluding the Investment Management Fees and Expenses) and any other general expenses charged to the Fund, excluding transaction costs. Any fees and expenses in excess of the TER will be reimbursed by the Investment Manager. During the year, the Fund recognised fee reimbursement of EUR163,433 (31 March 2017: EUR212,459) in the Statement of Comprehensive Income. The entire amount is outstanding as at year-end and is presented under Other receivables in the Statement of Financial Position. 29

33 NOTES TO THE FINANCIAL STATEMENTS (continued) 4. FINANCIAL ASSETS AND LIABILITIES AT FAIR VALUE THROUGH PROFIT OR LOSS 31-Mar Mar-17 EUR EUR Financial assets at fair value through profit or loss Held for Trading Corporate bonds 32,194,980 11,856,768 Forward currency contracts 5,580 6,386 32,200,560 11,863,154 Financial liabilities at fair value through profit or loss Held for Trading Forward currency contracts (13,750) (72,915) (13,750) (72,915) 5. OTHER RECEIVABLES 31-Mar-18 EUR 31-Mar-17 EUR Interest receivable on bonds 477, ,175 Fee reimbursement receivables 517, ,699 Other receivables 33,739 10,919 1,028, , CASH AND CASH EQUIVALENTS 31-Mar-18 EUR 31-Mar-17 EUR Cash and cash equivalents: EUR 1,263, ,652 GBP ,969 SEK USD 25, ,290, ,518 Cash and cash equivalents comprises cash on hand and demand deposits. Cash equivalents are short term, highly liquid investments that are readily convertible to known amounts of cash and which are subject to insignificant changes in value. Cash equivalents include unrestricted cash balances held at brokers. Cash and cash equivalents include cash amounts held with Citibank N.A. in the name of Citi Depository Services Ireland Designated Activity Company (the Depositary ). In March 2015, the Central Bank introduced Investor Money Regulations ( IMR ). These regulations, which are effective since 1 July 2016, detail material changes to the current rules in relation to investor money, and are designed to increase transparency and enhance investor protection. In response to these regulations, cash accounts held with a third party banking entity for collection of subscriptions, payment of redemptions and dividends for the Company were re-designated, and are now deemed assets of the Company. The balances on the cash accounts as at 31 March 2018 were EUR1,376, GBP500 and USD